In 2004 Libyan leader Muammar al-Qaddafi (see Biographies) realized the rapprochement with the United States and its European allies that he had been signaling for more than a decade. The cost paid by Libya to rejoin the international community was high, although it was small compared with the cost of the damaging trade sanctions of the 1990s. Libya’s penalty payments included $2.7 billion compensation for the 270 victims of the December 1988 Pan Am disaster over Lockerbie, Scot., $170 million for the 170 victims of the 1989 UTA flight, and $35 million to more than 160 non-American victims of the 1986 Berlin disco bombing. Following the lifting of sanctions by the UN Security Council in 2003, EU countries had intensified their trading activities in Libya, a process that significantly accelerated in 2004. In September 2004 U.S. Pres. George W. Bush lifted the ban on U.S. commercial air services to Libya and released $1.3 billion of frozen assets in recognition of Libya’s significant steps in eliminating its weapons programs. Other international airlines had already reestablished air services to Tripoli in 2003.

Other gestures from Libya, such as its promise in December 2003 to eliminate all weapons of mass destruction, were welcomed by the international community. The initiative prompted a visit to Tripoli by British Prime Minister Tony Blair in the spring of 2004. In February, Libyan Prime Minister Shokri Ghanem stated that several instances of alleged Libyan wrongdoing had not been proved and that the compensation payments were not an admission of guilt. His diplomatic gaffe was quickly repaired by the foreign minister in terms that satisfied the international community, if not the relatives of the victims.

With world oil prices above $50 a barrel, both the Libyan leadership and the people felt very confident about their immediate economic future. Public debates on the restructuring of the economy intensified, and Qaddafi seemed comfortable with the change from an economy that was mainly dependent on government subsidy and intervention to one in which private initiative and international private-sector synergies would drive economic expansion.